Thursday, October 22, 2009

On Mr Market

I used to think Mr Market was some kind of omnipotent masters of the universe, and we are mere slave to his whims and fancy. But as long as we fear him accordingly and give him the due respect, we would be shown mercy. The streets are littered with the bodies--hang, drawn and quartered no less-- of those who have been victims to his occasional but unspeakable wrath. They serve as stark warnings to the survivors.

But Mr Market is an elusive one. Nobody knows who he is, or has even looked him in the eye before. Some claim to be able to communicate with him through tongues. We call these people chartists. Those who are unable to comprehend these strange languages resort to vague ideas of superstition. So superstitious was I about Mr Market that I worship him in my mind, and refused to even mutter anything that would be construed as disrespect to Mr Market, much like how people do not speak ill of the dead, or of deities. A book I read warned just that, that we shouldn't speak of "fighting the market", for it will hit back, and hit hard. You should think of Mr Market in more benevolent terms, as a figure who will conspire to fulfill your wishes so long as you go with the flow. It's more Zen than biblical.

But now I know better. Mr Market is just indifferent. You can say anything you want, you can do anything you want. It doesn't matter. You can bet against the Black Swans all your life and retire rich. Others blow up even before they start. Go ahead, be so mighty impudent once in a while and remove your stop-losses just before it hits. Don't worry. Nobody is going to come up to you with some sort of a probability bill to pay afterwards, and certainly not Mr Market. He is just a psychological construct. He is just like God.